Tricky Ricci

John Ricitiello graduated from the Haas School of Business with a B. Sci. He served in leadership roles at The Clorox Company, PepsiCo and Häagen-Dazs International before taking on his first CEO position and Wilson Sporting Goods and later Sara Lee Corporation.

EA took Riccitiello on as COO in 1997, but the executive left to found an equity firm. EA wooed him back in 2007 to take on the CEO position.

During Riccitiello’s tenure EA has reshuffled its labels system more than once, gradually focussing on fewer, bigger hits and mobile gaming; it introduced Origin, a PC digital distribution client; launched a number of equality initiatives; remained committed to fostering fledgling IP such as Dead Space; acquired PopCap; and introduced cross-studio tech initiatives like the sharing of DICE’s Frostbite 2 engine.

EA’s two most important franchises, FIFA and Battlefield, grew enormously under Riccitiello’s guidance.

Riccitiello commanded a salary of $800,000 and has an estimated net worth of $10 million.

Riccitiello’s resignation was accompanied by and apparently the consequence of the publisher’s failure to meet financial targets in the last quarter, causing it to lower its guidance in January.

Larry Probst will manage a transition period until a new boss is found, with EA vetting both internal and external candidates. Probst is fairly well qualified to helm one of the industry’s biggest ships; he’s been chairman of the board since 1994 and serves as CEO from 1991 to 2007, and began EA’s assault on mobile and online.

“We thank John for his contributions to EA since he was appointed CEO in 2007, especially the passion, dedication and energy he brought to the Company every single day,” Probst said.

“John has worked hard to lead the Company through challenging transitions in our industry, and was instrumental in driving our very significant growth in digital revenues. We appreciate John’s leadership and the many important strategic initiatives he has driven for the Company. We have mutually agreed that this is the right time for a leadership transition.”

In an extended and less formal statement, Probst said Riccitiello has “compiled a history of great leadership” in his 12 years of service.

“John’s tenure at EA has been marked by bold decisions, a big vision for online games, a passion for product quality and an enduring respect for the people who work here. John made an indelible mark on our culture and shaped many of our most successful leaders. We wish him the very best in whatever he decides to do next,” he said.

“EA’s strategy and future are rock solid. Our business is built on more than a dozen powerful, globally recognized brands. We are clear leaders in the fastest growing category in games – mobile – and we are positioned to lead on the next generation of consoles. Most importantly we have deep reserves of talent – new faces and industry veterans who form the core of EA’s leadership.”

“EA expects that its revenues and earnings per share for the current quarter will be at the low end of, or slightly below previously issued guidance provided in its press release dated January 30, 2013,” the publisher said in an accompanying statement.

EA will announce its fourth quarter and fiscal year 2013 results on May 7. In the wake of Ricitiello’s announcement, the publisher’s stock has jumped 2.6% in after-hours trading, according to GamesIndustry. It continues a general upward trend from just below $14 to nearly $19 since early January,

Industry analyst Colin Sebastian issued a note to investors, as reported by Gamespot, describing Riccitiello as a “controversial” CEO, and assuring them the executive shuffle is justified.

“We believe timing makes sense for a CEO transition at the end of the fiscal year, and ahead of next generation console launches and a strong [second half of 2013] title lineup (Battlefield and EA Sports). We believe EA is well positioned for the console refresh cycle, and the company has made progress in building a digital platform and more recently controlling expenses. However, we note that inconsistent financial performance, some high profile title flops (e.g., Star Wars: The Old Republic) and employee turnover were issues that impacted the CEO’s credibility.”

According to Polygon, Riccitiello will receive 24 months of salary continuation and continued vesting of unvested stock options until November 30, 2013. Here’s his full resignation letter.

Dear Larry,

I hereby offer my resignation as CEO of Electronic Arts effective with the end of our Fiscal Year 13 on March 30, 2013.

This is a tough decision, but it all comes down to accountability. The progress EA has made on transitioning to digital games and services is something I’m extremely proud of. However, it currently looks like we will come in at the low end of, or slightly below, the financial guidance we issued in January, and we have fallen short of the internal operating plan we set one year ago. EA’s shareholders and employees expect better and I am accountable for the miss.

I have been at the helm as EA’s CEO for six years and served as COO for nearly seven years starting in 1997. I know this company well, and I care deeply about its future success. I leave knowing EA is a great company, with an enormously talented group of leaders and the strongest slate of games in the industry. I could not be more proud of our company’s games, from Battlefield and FIFA, to The Simpsons: Tapped Out and Real Racing 3. We have built many great franchises that will serve the company well in FY14 and beyond. In particular, I am confident that the investments we have made in games for next-generation consoles will put EA in a strong leadership position for many years ahead.

In offering my resignation, my goal is to allow the talented leaders at EA a clean start on FY14. I look forward to working with you in the coming weeks on an effective leadership transition. I’m extremely honored to have led this company and proud to have worked with all the great people at Electronic Arts.

Sincerely,

John Riccitiello

Missed targets
In EA’s recent financial calls, its reliance on EA Sports, Battlefield and mobile has been repeated often enough to become a mantra – because few of its other recent releases have quite hit the mark. It was particularly disappointed in Medal of Honor: Warfighter, choosing to put the franchise on hold for a while as a result of poor performance.

Meanwhile, even those titles which scored well with critics, like Crysis 3 and Need for Speed: Most Wanted, haven’t made a major splash, although it’s worth noting that Dead Space 3 topped the US charts this month. The publisher has constantly defended its major investment in Star Wars: The Old Republic, but the MMO has since gone free-to-play.

Moving into the future, EA’s triple-A business model will be further challenged by increased next-generation costs. Its upcoming release state has been kept quiet thanks to the secrecy surrounding new platforms, but we’re expecting a new Battlefield, Dragon Age and FIFA in reveals over the course of the year, as well as Army of Two: The Devil’s Cartel this month and Insomniac’s FUSE next quarter.